Rachel Wait rounds up the best credit cards on the market for those of you wanting a low interest rate for life!
If you’re anything like me, you’re bound to know that it’s pretty easy to get carried away when using a credit card. You pay for a couple of things using your plastic and before you know it, you’ve got a hefty bill to deal with.
Of course, if you can afford to pay off your credit card bill in full each month, then this doesn’t really matter. But if you can’t, it’s really important that you’re not paying stacks of interest on your debt.
After all, if you are, it’s likely to take you even longer to pay back that debt in full and you’ll be paying out a lot more cash.
So if you’ve got a lot of debt sitting on a credit card and it's racking up a lot of interest, your best bet is to transfer that debt onto a 0% balance transfer credit card. By doing this, you can take advantage of paying no interest on that debt for a year or more.
For example, if you were to apply for the Barclaycard Platinum with 16 Month BT Visa, you would have 16 months to clear your balance before the interest kicked in. And let’s face it, 16 months is a pretty decent length of time and should mean you can really start tackling your debt.
However, for some of us, the amount of debt we’ve racked up can take a long time to pay off and unfortunately, that can mean we still have debt left on our credit card by the time the interest-free period has come to an end.
In this case, you have two options. The first option is to move that debt onto yet another 0% balance transfer credit card. However, the problem with this is that you will need to pay yet another transfer fee – usually in the region of 3%. And you’ll have to repeat this process until you finally pay off the debt in full.
The second option is to use a lifetime balance transfer credit card. These clever credit cards offer a low rate of interest for the lifetime of the debt. So you can transfer over a balance and know that the interest will stay low until you’ve paid it off in full. And this means you won’t have to worry about constantly switching credit cards.
So let’s take a look at some of the best lifetime balance transfer cards on the market.
The top three
|
Credit card |
Balance transfer interest rate (APR) |
Transfer fee |
Purchases rate (APR) |
Other |
|
5.9% |
2% |
16.9% |
|
|
|
6.8% |
n/a |
6.8% |
|
|
|
8.9% |
n/a |
16.9% |
Balance transfers must be done by 1 January 2011. 1% cashback on all purchases. Monthly fee of £1. |
As you can see, there aren’t a great many long-term low interest rate credit cards on the market at the moment. However, the above offerings are very competitive.
The MBNA Platinum Credit Card Visa certainly offers the lowest rate at 5.9%, but bear in mind it does come with a 2% balance transfer fee – providing you carry out your balance transfer within the first 60 days, otherwise the fee is 3%.
Rachel Robson takes a look at why you might be better off using a low interest credit card.
This card also allows you to carry out money transfers. This means you can transfer money from your credit card into your current account and then use this to pay off an expensive overdraft or personal loan and take advantage of the low interest rate. Just bear in mind this comes with a 4% transfer fee.
It’s worth noting that you shouldn’t spend on the MBNA Platinum Credit Card Visa as it charges a much higher interest rate of 16.9% for all purchases. Although this card does operate positive order of payment, so your more expensive debts will be paid off first, it’s still not worth spending on this card as the interest rate is so high (unless you can pay off that debt within the 50 day interest-free period each month).
The Barclaycard Platinum Simplicity Visa, on the other hand, offers a rate of 6.8% on both balance transfers and purchases. What’s more, there’s no balance transfer fee! However, with this card, the interest rate is variable, so you should be aware that the rate could in fact change, although it is likely to remain low.
My least favourite card is the Egg Money World MasterCard. This card offers a higher rate of 8.9% on all balance transfers, but has no transfer fee. However, you will have to pay a £1 monthly fee with this card, and I’m not convinced this is worth it.
What’s more, the card offers a tempting 1% cashback on all purchases, which could encourage you to spend on the card. But if you do, and you've also carried out a balance transfer, all of your payments will go towards your cheapest debt (ie the balance transfer) first, leaving your purchase debt to rack up interest at 16.9%. That's because the Egg Money World MasterCard operates negative order of payment.
So only use this card for either spending or a balance transfer. And if you do spend on it, make sure you pay off your bill in its entirety each month.
Rachel Robson explains how negative order of payment works and how to avoid it.
Why it matters
Switching your credit card debt over to a lifetime balance transfer credit card doesn’t have to be a lot of hassle and it really can save you a lot of money.
For example, if you had a debt of £5,000 on a credit card with an interest rate of 16.9% and you paid off £100 a month, it would take you six years and 10 months to pay off the bill in full. And it would cost you £3,177 in interest!
However, if you were to transfer that debt onto the Barclaycard Platinum Simplicity Visa, it would take you four years and 11 months to pay off and you’d only pay £863 in interest – saving yourself £2,314!
Of course, the more you can put towards your credit card each month, the better. Try to avoid paying the minimum monthly repayment only as by paying off more, you’ll clear your debt far quicker and save yourself a lot in interest.
So if you’ve got a lot of debt on your credit card that’s going to take you a long time to pay off, switch over to a lifetime balance transfer card today!
More: 16 extremely long interest-free credit cards | Don’t let this happen to your credit card